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    Marketing Mix for Sri Lankan Tea Essay

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    Table of Contents 1. Introduction02 2. Applying the Marketing Mix……. 04 2.

    1 Product……….. …………………………………………………………………… ………….. 05 2.

    2 Place ………. …………………………………………………………………………………. 06 2.

    3 Price ………………………………………………………………………………………….. 08 2.

    4 Promotion ……………………………………………………………………………………. 09 3.

    Conclusion 12 4.

    References ………………………………………………………………………. 13

    1. Introduction Since the discovery of Tea in 2737 B. C in China, and after the Europeans learnt about tea in 1589, drinking tea has spread throughout the world and today it is a widely consumed beverage.

    Tea production in Sri Lanka is of high importance to the Sri Lankan economy and the world market. Sri Lanka is the world’s fourth largest producer of tea and the industry is one of the country’s main sources of foreign exchange and a significant source of income for labourers, with tea accounting for 15% of the GDP, generating roughly $700 million annually. Ceylon tea is divided into three groups: High or Upcountry (Udarata), Mid country (Medarata), and Low country (Pahatha rata) tea, based on the geography of the land on which it is grown.

    Tea produced in Sri Lanka carries the “Lion Logo” on its packages, which indicates that that the tea was produced in Sri Lanka. The most important foreign markets for Sri Lankan tea are the former Soviet bloc countries of the CIS, the United Arab Emirates, Turkey, Iraq, Iran, UK, Japan, Saudi Arabia, Syria and Libya. Ceylon tea was renowned for its quality, but supplies exceeding demand, higher cost of production and intermediary’s margins have forced the tea industry to compete on price rather than on quality.

    Consumers preferring flavoured and instant teas are also not helping the local tea industry that produces old style orthodox teas. If you take the trend world over convenience and fast food are popular. People now do not have the time to brew tea and make tea in the traditional way. At present, instant tea is one of the fastest growing segments in the beverages market. Instant teas and green tea demand is growing in Europe, USA and Japan. Instant tea has created a lot of excitement and modernized the image of conventional tea. About 50% of instant tea consumers are newcomers to the tea market.

    Instant tea has not replaced the traditional tea bag, however, instant tea covers a very wide product range, usually depending not on the tea, but the flavouring used. The tea is usually a relatively a minor component, with sugar typically the primary ingredient, then flavourings, colouring agents, anti-caking agents, etc. Most instant teas do not contain real tea, rather tea extract. This artificial addition further separates instant teas from their parent leaves. However, one must not fail to appreciate the success of instant tea and recognize that it is a product, which has its roots in tea.

    The most “instant” of instant teas is called ‘Ready to Drink (RTD)’. Also known as bottled tea there used to be a strong stigma in the tea community about this relative of the leaf. Viewed largely as the stepchild of the big cola companies, RTD teas were thoroughly infused with their mass-production ethos: make it cheap, stack it high, move it fast. However, a new trend is beginning to emerge from the creative folks of the tea industry. Fighting to erase the image that Goliath cola companies have painted for tea, some true tea-loving companies are introducing innovative bottling methods.

    They are making great teas available without the addition of unnecessary preservatives, and without covering the lack of quality tea with an overabundance of sugar. The instant tea manufacturers are hoping to challenge beverage marketers outside the tea industry with their new products. The attempt to attract younger consumers is an effort to compete with the cold-drink market, which has grown by four times in the last ten years, according to market-research firm A. C. Nielsen. Nielsen’s statistics show a slow decline in the tea market over the past 10 years.

    Hence, instant tea manufacturers are targeting a younger market, hoping the product innovation will cultivate a new niche of tea drinkers in the declining market for tea. Young people are looking for convenience and variety and more countries are setting up instant tea factories to capture the growing demand. Applying the Marketing Mix “Marketing mix” is a general phrase used to describe the different kinds of choices organizations have to make in the whole process of bringing a product or service to market. The 4 Ps, first expressed in 1960 by E J McCarthy, is one way – probably the best-known way – of defining the marketing mix.

    The 4Ps are: In layman terms the Marketing Mix is the creation of a product that a particularly group of people want, put it on sale some place that those same people visit regularly, and price it at a level which matches the value they feel they get out of it; and do all that at a time they want to buy. However, a lot of hard work needs to go into finding out what customers want and how the product can meet such wants. Thereafter the company needs to figure out how to produce the item at a price that represents value to them, and get it all to come together at the critical moment.

    Getting even one element wrong can be disastrous for the product as well as for the company. However, when entering a foreign market in addition to the mix the company should focus its attention on the cultural aspects as well. For example, McDonald’s fast food giant was very successful in the entire world, but it failed in the Indian market, as it did not change its menu that included beef, which is not consumed in India. This report will discuss marketing an Instant Tea in America, UK, Japan and Australia, with regard to the marketing mix while considering the cultural aspects in each of these markets as well. 2. Product/Service As mentioned in the introduction tea as a beverage has been in existence for centuries. Therefore identifying the need for tea is not what we need to do. The problem many consumers face is the time they need to set aside from their fast pace life to brew a cup of tea. Hence, the objective should be to make sure this need is satisfied. With the fast pace life and the trend of consumers looking more and more for convenience, it is very important that instant tea cater to this need. Instant tea should be easy to prepare where the consumer spends less time in preparing a quality product faster so they ave more time to enjoy it. Therefore, adding water (cold or hot) to powder to get the same effect and taste as a brewed a cup of tea should be a key feature of an instant tea. Further, this product should be able to prepare at anytime and at any given place when needed. This should also be nutritious by adding no artificial ingredients as the consumers of this product will buy this as they like consuming it rather than a drink or water or a cola. If the consumer is guaranteed of these features, they will go for this product.

    In the US market, this product will mainly be consumed by the Asian population who has a liking for tea. Hence the product should appeal to the Asian consumers and it should concentrate on captivating the younger generation where they feel accepted by their associates in having this tea. Culturally, tea is enjoyed by the older generation. Therefore, instant tea should meet the expectation of the younger generation. Globalisation requires a company to consider all aspects of a product, both domestically and internationally, at the creation stage itself.

    Doing so prevents expensive faux pas, such as the case of the Chevy Nova. Its name in Spanish can be said as “No va,” which means, “It doesn’t go,” not a particularly reassuring or marketable name for a car (Semenik and Bamossy 1995). The brand, its name, its feature emphasis, and the like must be developed with consideration for all its major markets worldwide. In areas where conflict is apparent, it is vital the company adapt to the local market. Therefore the brand name of an instant tea drink should be something which is accepted globally and not have any undesirable meaning in any language.

    The brand name ideally should be something that is instantly recognisable with the product. Some of the companies which produce instant tea include; Lipton, Unilever, Lyons Tetley, Nestle, Rasna, Tata Tea under the brand names ‘Red Rose’, ‘Ceytea’, ‘Tetley Freeze Dried Instant Tea’, ‘Nestea’, ‘Bollywood Chai’ and Tata Tea respectively. A good example of an effective global product and marketing is McDonalds. McDonalds has grown internationally primarily through franchising, which combines the global brand of its restaurant with local business people who can adapt the restaurant to local tastes and needs (Vignali 2001).

    In examining McDonalds global marketing mix, some products are fixed throughout the organisation. French fries, for example, are available at any McDonalds outlet and are subjected to high levels of quality control (Vignali 2001). Additional products are sometimes added, based on local expectation. While one can get wine at McDonalds in France, in the restaurant’s home country of the United States there are no beverages available stronger than a chocolate milk. Other products are adapted to conform to the local cultural values of various international markets.

    In Israel, for example, sandwiches are offered without cheese as is required of kosher establishments (Vignali 2001). However, the primary product mix of hamburger, fries, and a coke remains constant throughout the global organisation. 2. Place Place is the mechanism through which goods or services are moved from the manufacturer/service provider to the consumer. Place is an important element to consider especially when marketing a product such as instant tea which is regarded as a convenience product.

    Therefore it’s the companies who identify the best place to market that attracts the customers’ attention which helps move the product. For example, Nestle markets their Kit Kat Chocolates at point of sale merchandising because consumers make instant, snap decisions from a wide range of products on view. Hence having such products near the cash counters and at reachable or eye level of children, helps them get that extra sale as its reaches wider number of consumers in one market. Supermarkets can help build brands by helping with placing the products in visible areas rather than at the bottom of the shelf.

    The best place to make Instant tea available are the beverage stands and fuel station grocery mini markets where many people tend to visit when they require a beverage to quench their thirst. Around the world supermarkets are located in large malls as well as fuel stations. Therefore identifying such places where many visit will be a starting point to sell instant tea. Another good place to have instant tea available is the airports, international as well as domestic. In such places machines should be made available. For example, in countries such as UK, USA, Singapore and Japan, international airports are mainly for transit travelers.

    Therefore, a variety of people will arrive in such airports and this will enable to spread the instant tea awareness as well. Further, having it in fast food outlets with a description of its health care aspect will be a good place to attract consumers. Identifying the best distribution channel when entering foreign markets is another key criterion that needs to be looked into before finalizing the plan. For example, the locations identified above to place instant tea are places where people don’t look especially for the brand/product.

    These are places where people will see the product and develop a liking for it and want to consume the product since its available at that specific time. Therefore, having a perfect distribution channel is a must, especially in countries such as UK, USA, Japan and Australia, since they are geographically large. Having a convenient, fast moving product available 24 hrs a day, 365 days a year is major task and can only be achieved by identifying distribution partners in each country who has the capability to handle distribution.

    Initially, this product should be made available in selected locations/regions/cities where it will help the product to be established. Once this is done, looking at the distribution partner the product should be gradually made available in other major locations/regions/cities. Further, having a localized well reputed distribution partner will help in breaking into the customers mindset as well as breaking the cultural barriers existing in each country.

    In marketing such a product, it is essential that a team attends trade shows around the world to identify changing customer needs as well as making sure the products are available in the identified locations. Trade shows is a good marketing mechanism which will help a company enter a new market as it gives an indication of the competition in such countries, other players that are already present as well serves as a introduction to the new market among the customers. For example, Unilever Sri Lanka, a major fast moving consumer goods (FMCG) manufacturer markets their instant tea brand ‘Ceytea’ mainly through participation in trade shows.

    Once the ideal distribution partner is identified via research and market players, the marketing should be given to the distributor initially as they are more aware of the market trends and customer needs. Once the product is established, it will be better to move without the intermediary. Unilever Sri Lanka’s Ceytea brand was made available in Europe via an intermediary until it received market acceptance and thereafter the marketing was done directly as Unilever Sri Lanka understood the market. 3. Price A key advantage of maintaining a strong brand image in a competitive market is a degree of flexibility in the pricing strategy.

    It is a common characteristic of imperfectly competitive markets for producers to concentrate on non-price competition. When looking at the pricing strategy for Nestle’s Kit Kat, it can be seen from the figures that the real price have remained remarkably stable over the last sixty years. The first thing the company should identify is the value of their product to the customer. Is the customer willing to forego a higher percentage of their income to purchase the product or is it a small percentage of the income.

    Further, is this a necessity or a perception to enjoy this product? These questions should be considered very carefully in establishing a price. For example, instant tea is more a substitute for a beverage and pricing the product higher than what its competition is offering will not be viable. However, on the other hand this product will be priced higher than other convenient beverages that will not be natural or healthy. Therefore the additional benefits that could be derived compared to other beverages will be in favor of having slightly higher price.

    The contradicting factor for this is whether there are established prices in the market? What is offered by competitors who market a similar drink? Or has the government specified the price for such beverages having highest or lowest price points? In the US and UK, many such beverages have established prices and going against such prices will be detrimental for the future of the product. Another point that needs to be analyzed is the price elasticity or the sensitivity of customers to a change in the price. Will a slight increase in price have bigger drop in quantity?

    In such instances the company will need to look at reducing their internal costs and try to sell more at the same price. The Japanese market is very sensitive for a price change as it has variety of substitutes available and a slight drop in demand can mean huge losses due to large sales. This will result in excess stock in the warehouses and an extra cost to the distributor. Since instant tea is a convenience product pricing will have to remain relatively low as there are so many ‘ready to drink’ beverages available in the market.

    Once the final price to the customer is established, the discount price that is going to be offered to the distributors must be decided. Having a slab wise price based on the volume sourced by each distributor will help boost sales from each distributor. However, this method will vary depending on each country and the population size. For example, US will have larger sales than Australia mainly due to the population size. But in reality the Australian distributor would have sold higher number. In countries such as Australia and UK, a higher priced product will be treated as a higher quality product due to perception.

    However, in Japan a higher price product will not fetch consumers who are only looking to quench their thirst and in the US more than price, availability and health facts (new trend) will have a stronger impact in purchasing the product. Therefore each country will need to have separate pricing strategies. In any situation, the pricing among each country should not create a situation where the buyer buys from one country and sells it in another country to achieve a profit. This could occur especially when operating through distributors and where a discount scheme is offered to increase it by the number of products sold.

    Having price regulations in the contract with distributors will help minimize/control such a situation. 4. Promotion Promotion is another important ingredient in the marketing mix where this helps to build the perception and the want for the product. Promotion is the most localized component of the marketing mix. “The consumer, not the company, must decide what can be the same across borders,” and usually promotion is the most variable (Mazur 2004, 18). For example, McDonalds used sports figures in its promotional materials, ads, and television commercials several years ago.

    Rather than choose one known international sports figure, such as a Tiger Woods, the company picked figures recognized in each respective market, with a basketball star used in the United States, a footballer in the UK, and so on (Vignali 2001). This allowed McDonalds to project a locally appropriate image, one that identified the restaurant with local concerns and presented it as native to the region, rather than the United States. This in other words bridges the gap between culture and the product that is being offered.

    In the case of instant tea, having film stars promote this will be a good strategy as this will portray a message of having a healthy beverage in their busy life style. In US, UK, Australia and Japan, film stars are treated as idols and many follow what they do, eat, wear and hang out in places where their favorite film star goes regardless of cost. Having such celebrities use a brand will make the brand popular among young as well as old people. Displaying billboards in busy city areas where celebrities consume instant tea will help to capture a wider target market.

    Another way that the product can be promoted is through help from the supermarkets that will sell this product. The supermarket pamphlets, brochures and other advertising material can promote the product. Advertising plays a critical role when entering foreign markets as it all depends on how the target customers are approached. The same promotional campaign cannot be used in US as well as Japan. The reason being, American life is faster paced, while Australia has a more laid back life style, while in Japan cultural influence is still very strong.

    Further, Japanese will have an ego problem if the same advertisement that was targeted for the US market is used in Japan. UK will have the same effect if a Japanese advertisement is played or used in UK. Therefore each promotional method will need to be tailor made to suite each country’s culture and the target customer base. For example, Nisan Car Company has the same car in the US and in Australia with a different name. This is purely to make sure its accepted by the each market. In any such instance, the product should have its own brand name and image irrespective of how the message is sent across in each country.

    For example, Nike has its own name and its logo (Swooch) which makes it distinct in any country the product is marketed. However, the way its marketed is localized to suite its local customer base. Therefore establishing the brand name to image quality, convenience, health and affordability in the instant tea product should be key focus points in all its advertising campaigns though execution is different in each country. The method of advertising should be via media and having billboards in each major city that is being concentrated.

    Having advertising boards in major air ports and informing in them the availability in the air port itself will be a good strategy. Making sure the packaging is also done as per each country’s guidelines is another important factor. For example, US is very strict about the phthalate in products as this will harm children. Therefore suppliers need to make sure the required tests are done to avoid this chemical. Further, information on the pack will differ from one country to another. Having distributors giving authority to market the product in each country should be done in a way that the brand name is not tarnished and is ithin the criteria mentioned above that materializes from the brand. Further, promotions should be handled focusing on the manufacturing company and not the intermediary company name. Making sure the product is available in the right places and making sure product is moving will be the responsibility of the distributor. Conclusion The first thing that should be done when introducing a new product is to have a market research done in each market to identify the target market. This will help to gain a better insight of each market, gaining knowledge about its competitors and most of all the customers.

    Many large players have entered markets without proper research and ended up loosing their overall market share in other markets as well. A good example is the medicine Insulene which is used by diabetic patients. When this was marketed in the United Arab Emirates (UAE), this had adverse reactions as this included one ingredient from the pig, an animal banned in UAE. Therefore, the company had to re-launch the product making the product specialised for that UAE market. Further, it had to issue a press release apologising to the people of UAE and recall all the goods that were in stores at their cost.

    Going into a market with the attitude of “here is our product, take it or leave it” will not gain much acceptance among the customers. Therefore having researched the market and tailoring the marketing mix to capture all such aspects will be the key in succeeding in a foreign market. In conclusion it can be said that organisations must examine the purity of their global marketing plan rather than simply taking the national marketing plan and tweaking it to hopefully fit an international market. Businesses should begin a global marketing plan from scratch, making it truly in tune with each different market segment.

    Beginning from a global perspective will allow an international business to decide which products to offer where and to better position and promote its products worldwide. While a 100% global marketing mix is not attainable, many companies can move successfully onto a global scale by branding globally but acting locally. Creating an adaptable marketing strategy and component mix will allow the business to successfully negotiate the regional and cultural differences it will face, and increase both markets and profitability on the global market.

    References • Semenik, R. , and Bamossy, G. 1995. Principles of Marketing, a Global Perspective. South Western, Cincinnati, USA. • Vignali, C. 2001. McDonald’s: “think global, act local” – the marketing mix. British Food Journal, Bradford, vol. 103, issue 2, p. 97. • Mazur, L. 2004. Globalisation is still tethered to local variations. Marketing, London, 22 January 2004, p. 18. [pic][pic][pic][pic][pic][pic] ———————– • Product (or Service) • Place • Price • Promotion [pic]

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